In short
A stock dividend is a pro rata distribution of a company's own shares to its shareholders. It moves an amount from retained earnings to paid-in capital without changing total equity.
Key takeaways
- A small stock dividend (generally under 20–25% of shares outstanding) is recorded at the shares' fair value.
- A large stock dividend is recorded at par value.
- Stock dividends and splits are applied retroactively in computing earnings per share.
Where it's tested
FAR: Equity & Earnings Per Share — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company declares a 2-for-1 stock split in November. How does this affect the weighted-average share calculation for EPS?